Franchising in the Real Estate Agency Sector
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Copyright is owned by the Author of the thesis. Permission is given for a copy to be downloaded by an individual for the purpose of research and private study only. The thesis may not be reproduced elsewhere without the permission of the Author. Franchising in the Real Estate Agency Sector: Multiple Perspectives and Converging Angles of Inquiry A thesis submitted in partial fulfilment of the requirements for the degree of Doctor of Philosophy Susan Flint-Rartle Massey University 2007 Abstract This thesis investigates the widespread phenomenon of franchising in the real estate agency sector. To date, fr anchising research has been largely multi disciplinary, explanatory theory relatively undeveloped and there has been heavy reliance on the point of view of the franchisor. This thesis broadens investigation to include multiple perspectives of both the franchisor and franchisee. It examines the important contribution made to the relationship by both parties and the nature of their parallel business venturing. Drawing on data collected fr om the main real estate franchisors operating in New Zealand and fr om samples of franchisee business owners in the Asia-Pacific region, the study uses a pragmatic mixed methodological approach. It is believed by breaking the quantitative tradition the complex nature and sector specific characteristics of franchising can be better understood. Two interlinked studies are undertaken. First, the franchisor's perspective of franchising is examined and a window study is used to illustrate the notion of resource competency. Second, fr anchising as an entrepreneurial activity mainly fr om the franchisee point of view expands existing debate linking fr anchising with the entrepreneurship domain. It is argued that the strategic decision to fr anchise taken by real estate agency fr anchisors requires a wider explanation than offered by current agency and resource scarcity theory. The success of fr anchising in this sector is based on the development of a sophisticated resource competency that ensures a highly evolved, sustaining relationship with the fr anchisee and perpetuation into the mature growth phase. Franchising systems are defined as entrepreneurial organisations in which co operation between two different types of entrepreneur takes place. The fr anchisor initiates the system and builds the brand while the franchisee develops the local market. Thus value is created as entrepreneurial ventures are established and flourish. Franchisors and fr anchisees amalgamate innovations and fr anchisees develop their own resource competencies complimentary to the parent organisation. Together with the people involved, wealth creation and innovative processes and activities undertaken by both parties in the relationship, franchising in real estate agency is shown to be fully compatible with entrepreneurship constructs. Acknowledgments I am indebted to my supervisor, Anne de Bruin who is my friend and academic mentor. Her constructive criticism and ready good humour helped to guide me throughout this process. Larry Rose has given sound advice and direction and other academic colleagues have lent their encouragement and support, especially Ellen Rose who very generously helped me at a vital stage. By sharing their time and experiences my industry colleagues have made this research possible and I am extremely grateful to Harcourts New Zealand fo r their openness and willingness to engage with me. My family, Ian, Victoria and Gareth, and friends have listened, made suggestions, forgiven my weaknesses and helped keep me in touch with real life. Thank you all. 11 TABLE OF CONTENTS page Abstract Acknowledgements 11 Table of Contents 111 List of Tables IX List of Figures X Chapter 1. Introduction 1.1 Scope of the Study 1 1.2 Context and Approaches 4 1.3 Justification fo r the Research 5 1.4 A Word on Terminology 6 1.5 Franchising Background 7 1.5.1 The Concept of Franchising 8 1.5.2 Real Estate Agency Franchising 10 1.6 Real Estate Agency in New Zealand 12 1.6.1 Franchising in New Zealand Real Estate Agency 14 1.7 Angles of Inquiry 15 1.8 Limitations 16 1.9 Structure of the Thesis 17 2. Strands in the Real Estate Agency and Franchising Literature 2.1 Introduction 21 2.2 A Selection of Real Estate Agency Literature 21 2.2.1 Agent Selection and Effectiveness 22 2.2.2 Agent Efficiency 24 2.2.3 Do Agents Provide a Quality Service? 30 2.2.4 Competing in a Fiercely Competitive Environment 32 2.2.5 Facing Change 34 2.3 Franchising Strategy: Theoretical Development 38 2.3.1 Agency Theory 38 2.3.2 Resource Scarcity Theory 42 2.4 Real Estate Agency Franchising: A Diverse Theoretical Perspective 45 2.4.1 Upper Echelon Theory- The Human Element in Decision Making 48 2.4.2 Resource-Based Theory 50 2.4.3 Institutional Theory 51 111 2.5 Chapter Conclusion 53 3. The Entrepreneurial Perspective 3.1 Introduction 56 3.2 Does the Entrepreneurial Concept Fit the Agency Sector? 56 3.2.1 Entrepreneurial Opportunity in the Real Estate Market 58 3.2.2 Being Entrepreneurial 59 3.3 The Entrepreneurship - Franchising Nexus: Literature Relevant to the Study 61 3.3.1 Stage of Growth? 64 3.3.2 The Question of Franchisee Independence 65 3.4 Co-operative Entrepreneurs 68 3.4.1 Operational Teamwork in Real Estate Franchises 69 3.4.2 Networks and Symbiotic Relationships 71 3.5 The Entrepreneurial Franchise Organisation: Corporate Entrepreneurship in Action 74 3.6 Chapter Conclusion 75 4. Research Approach and Methodological Processes: Pre Understanding 4.1 Introduction 77 4.2 My Role as Researcher 80 4.3 Underlying Knowledge Claims 81 4.3.1 Constructivist or Illustrative? 82 4.3.2 Postpositivism 82 4.3.3 Pragmatism 83 4.4 A Mixed Methods Approach 84 4.4.1 The Exploratory Sequential Mixed Method Design 86 4.4.2 Data Interpretation 89 4.5 The Franchisor Perspective 90 4.5.1 Interviewing Franchisors 90 4.5.2 The Window Study 93 4.5.3 Issues of Reliability 94 4.6 The Franchisee Perspective 95 4.7 Phase One-The Qualitative Approach 96 4.7.1 Doing the Research 97 4.7.2 Issues of Reliability 100 4.8 Phase Two-The Quantitative Approach 102 4.8.1 The Survey Group 102 4.8.2 The Survey Instrument 104 4.8.3 Issues of Reliability 107 4.8.3.1 Content Validity 107 4.8.3.2 Construct Validity 108 4.8.3.3 External Validity 109 4.9 Development of the Interview Guides fo r Both Phases 109 IV 4.10 Chapter Conclusion 110 5. The Franchisor Perspective: Franchising Strategy 5.1 Introduction 113 5.2 Franchisor Perspectives 113 5.2. 1 Market Share 115 5.2.2 Ownership 117 5.2.3 Acculturation 119 5.2.4 Parallelism and Focus 121 5.2.4.1 Parallelism 121 5.2.4.2 Focus 123 5.2.5 Franchisor Unique Resource Competency 124 5.2.6 Internationalisation and Brand Affiliation 126 5.2.7 Franchisor Perspectives: Summary 127 5.3 A Window Study: Corporate Entrepreneurship and Resource Competency in Action-The Harcourts Real Estate Group 128 5.3.1 Introduction 128 5.3.2 The Harcourts Corporate Organisation 129 5.3.3 A Short History of the Harcourts Group 130 5.3.4 The Harcourts Group Resource Competency 132 5.3.4. 1 Accelerate IT: Technological Competency 137 5.3.4.2 Company Structure 138 5.3.4.3 Targeted Franchisee Support 140 5.4 Window Study: Summary 140 5.5 Chapter Conclusion 141 6. The Franchisee Perspective: Qualitative Study 6.1 Introduction 143 6.2 Phase One: The Perceptions of Real Estate Agency Franchisees 144 6.2.1 The Sample Demographic 145 6.3 Phase One Findings: The Emerging Themes 146 6.3.1 Independence 147 6.3.1.1 Growth Plans 150 6.3.1.2 Innovative Business Methods and Measures 153 6.3.1.2. 1 Marketing 154 6.3.1.2.2 Human Resource Management 156 6.3.1.2.3 Teams and External Alliances 158 6.3.2 Connectedness 159 6.3.2.1 Relationship Quality 160 6.3.2.2 Importance of the Brand 163 6.3.3 Entrepreneurial Perceptions 165 6.3.3.1 Risk Taking 166 6.3.3.2 Competitiveness 167 6.3.3.3 Past Ventures 167 6.4 Chapter Conclusion 168 v 7. The Franchisee Perspective: Quantitative Study and Synthesis 7.1 Introduction 171 7.2 Examination of the Measurement Tool - Exploratory Factor Analysis 172 7.2.1 Factor Loadings 176 7.3 Franchisee Perceptions: An Objective Viewpoint 180 7.3.1 The Franchisee Sample 180 7.4 Perceptions of Being a Franchisee 184 7.4.1 Why Franchise? 184 7.4.2 Factors of Importance to Franchisees 186 7.4.3 General Satisfaction with Franchising 189 7.4.4 Franchisor Rating 190 7.4.5 The Use of Composite Factors to Measure Franchisee Values 192 7.4.5.1 What Matters in Business? 192 7.4.5.2 How Does the Franchisor Rate? 193 7.5 Are Franchisees Entrepreneurial? 195 7.6 Measuring Entrepreneurial Factors 196 7.6.1 Innovation 196 7.6.2 Autonomy and Dependence 199 7.6.2.1 Autonomy 199 7.6.2.2 Dependence 201 7.6.3 Personal and Business Value Perceptions 203 7.6.4 Risk Taking Propensity 204 7.7 Secondary Findings 207 7.7.1 Multi OfficeOwnership 207 7.7.2 Prior Personal and Current Office Income 209 7.7.3 Franchisee Age, Education, Qualifications and Gender 210 7.7.4 The Importance of Franchisee Experience 212 7.8 Limitations ofthe Quantitative Findings 214 7.9 Phase Two: Summary 216 7.10 Synthesis of the Two Phases 217 7.10.1 The Samples 218 7.10.2 The Interview Guide and Survey Instrument 219 7.1 0.3 Findings and Inferences 220 7.1 0.4 Autonomy and Dependency 222 7.10.5 Innovation 226 7.1 0.6 Being Entrepreneurial, Taking Risk and Creating Wealth 227 7.11 Chapter Conclusion 229 VI 8.